Political Enonomy

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From 27 – 29 June 2017, the „Annual Meeting of the New Champions“ of the World Economic Forum is taking place in Dalian, Liaoning province. Technology and innovation issues such as renewable energies and data exchange are in the specific focus of this year’s event. In his speech on June 27, Chinese prime minister Li Keqiang argued the case for free markets and globalisation, a position similar to the remarks made by Chinese president Xi Jinping in Davos at the beginning of this year.

Today, the Chinese Communist Party (CCP) will convene for its Fifth Plenum of the 18th CCP Central Committee. The main task to be addressed during the upcoming days is outlining the 13th Five-Year Plan (2016 – 2020; shisanwu, 十三五). It is expected that the CCP leadership will adjust the country’s annual growth rate to a more ‚realistic‘ level of 6.5% and shift its economic focus from the export sector to enhancing China’s domestic development and investments in infrastructure.

Beside economic issues, it is an open question whether personal changes will occur the CCP leadership. One possible replacement could happen in Shanghai, where the current CCP chairman Han Zheng, a Politburo member, could be removed from his post. Furthermore, Liu Yuan, political commissar of the General Logistics Department of the People’s Liberation Army (PLA), could be assigned with a seat in the Central Military Commission (CMC).

Lastly, China experts argue that Xi Jinping’s anti-corruption agenda could be intensified in the years to come, especially via inspections in major state financial institutions such as the central bank, securities regulators and state-owned banks, guided by the Central Commission for Discipline Inspection (CCDI) led by Wang Qishan.

At the end of this week, the major results of the Fifth Plenum will then be published in a communiqué. The next steps in implementing the 13th Five-Year Plan will be undertaken at the annual Central Economic Work Conference in December and at the National People’s Congress (NPC) meeting in March 2016.

– On 17th June 2015, Australian trade minister Andrew Robb and China’s minister of commerce Gao Hucheng have signed a bilateral free trade agreement (FTA) after ten years of negotiation. Nearly all tariffs on Australian resource and energy products will be removed. With the FTA, Chinese workers can now more easily work for infrastructure development projects in Australia for a transitional period up to three months.

– China’s president Xi Jinping: ChAFTA can bring „stability and peace to the Asia-Pacific Region and the word“ and „an opportunity to push forward for a comprehensive Sino-Australian strategic partnership for a sustainable and stable development“; Australian prime minister Tony Abbott: ChAFTA a „historical agreement“ and „a model of integration for our future economy“.

– Australian opposition parties and the Australian manufacturing union are expressing their concerns over the agreement, thereby fearing a job loss for Australian workers and obstructing a clause on investor-state dispute settlement (ISDS).

After ten years of bilateral negotiations, the People’s Republic of China and Australia have signed a bilateral free trade agreement (China-Australia Free Trade Agreement – ChAFTA). The negotiations were concluded in 2014, yet the official joint signature took place in Canberra on 17th June 2015 by China’s Minister of Commerce, Gao Hucheng (高虎城), and Australia’s Minister for Trade and Investment, Andrew Robb.

ChAFTA’s coverage

The bilateral free trade agreement (FTA) primarily aims at boosting bilateral trade and economic growth. China is already Australia’s largest trading partner, with total trade worth almost $ 160 billion in 2013/14 (see Abbott/Robb 2015). According to official Australian statements, ChAFTA „secures better market access for Australia to the world’s second largest economy, improves our competitive position in a rapidly growing market, promotes increased two-way investment and reduces import costs. It is a win for households and businesses alike“ (see ibid.).

Sino-Australian economic relations have developed rapidly. In 2014, the bilateral trade volumen amounted to $ 136,9 billion which is 16 times higher as in 2000. Until the beginning of 2014, China’s foreign direct investment (FDI) in Australia accounted for approximately $ 74,9 billion, making Australia the most important FDI target country after Hong Kong (see Ministry of Commerce 2015).

According to the Chinese Ministry of Commerce, Chinese export goods will face a tariff reduction worth of approximately $ 1.67 billion from the first day of ChAFTA. This reduction mainly concerns clothing and leather products, electronics, machinery and other manufactured goods, steel and metal products as well as chemical products (see People’s Daily 2015a).

Furthermore, from a Chinese point of view, ChAFTA could act as a role model for further economic integration in the Asia-Pacific Region, thereby paving quicker way for the aspired Regional Comprehensive Economic Partnership (RCEP) as well as the Free Trade Area of the Asia-Pacific (FTAAP; see Ministry of Commerce 2015).

Right after the joint signature, China’s president Xi Jinping (习近平) and Australia’s prime minister Tony Abbott exchanged thank-you letters (see People’s Daily 2015b). Xi Jinping stated therein that „China and Australia alike are important members for the big Asia-Pacific family. China wishes to work together with Australia, to firmly hold on the proper direction in the development of bilateral relations and to abide by the principles of mutual respect and mutual benefits. The signature of the free trade agreement is an opportunity to push forward for a comprehensive Sino-Australian strategic partnership for a sustainable and stable development, and to promote peace and prosperity for the Asia-Pacific Region and even for the world.“ Furthermore, China’s trade minister Gao Hucheng said that ChAFTA is a„comprehensive, high-quality and balanced agreement“, representing a cornerstone in Sino-Australian relations (see Hurst 2015a).

Australian prime minister Tony Abbott remarked that the „Sino-Australian free trade agreement is a historical agreement, as it not only will promote the economic growth of both countries (…) but it will also be a model of integration for our future economy.“ (see People’s Daily 2015b). Abbott further announced that the FTA will bring about a percentage of 99.9% of duty-free entry of Australian resources, energy and manufacturing exports within the next four years. Beyond mere export and tariff-reduction issues, it will bring access for Australian service providers, financial, education, health and aged care to China’s services sector, „a sector that is already the largest contributor to China’s GDP and is set to drive economic growth in coming years“ (see Hurst 2015a).

Still, not everyone is amused

Yet while the official statements emphasise on how beneficious ChAFTA will be for the economies of both countries, the agreement still faces opposition in Canberra. The full text of the agreement will be inquired by the parliament’s standing committee on treaties which clears the way for parliamentary considerations on amendments to accordant legislation (see Hurst 2015a).

One specific trouble spot is a clause on investor-state dispute settlement (ISDS) which is being criticised by many opposition parties. The Australian Labor Party as the largest opposition party is against the ISDS mechanism, too. Penny Wong, Labor’s senate leader and the party’s spokeswoman for trade, remarked that „Labor does not support investor-state dispute settlement clauses in agreements“ (see Hurst 2015a).

In this context, Peter Whish-Wilson of the Green Party expressed: „Regardless of the supposed marginal economic benefits, the Greens will never support an agreement that makes future governments liable to be sued by foreign corporations simply for making laws that protect the public interest“ (see ibid.).

Another flashpoint concerns a memorandom of understanding attached to the FTA which permits Chinese workers being brought to Australia up to three months for infrastructure development projects worth $ 150m or above. This memorandum which aims at „investment facilitation arrangements“ for projects in the food, agribusiness, resources, energy, transport, telecommunications, power supply and generation, environment or tourism sectors, was mainly criticised by the Australian Council of Trade Unions (ACTU, see Hurst 2015b).

The ACTU is concerned that these arrangements could lead to a huge inflow of Chinese workers at the expense of local jobs. ACTU president Ged Kearny said that the government seemed „intent on selling out even more local jobs“ (see ibid.). Allen Hicks, national secretary of the Electrical Trades Union, called this agreement „a national disgrace“ (see ibid.). And Andrew Dettmer, the national president of the manufacturing union, pushed Labor to refuse the deal when the Australian parliament will vote upon legislation that is needed to implement the FTA commitments (see ibid.). Representing the Lavbor Party, Penny Wong remarked that Labor will not support „provisions which give Chinese companies operating in Australia superior legal rights to those enjoyed by Australian companies“ and

Contrary to the opinion of the unions and the parlamentary opposition, business and industry representatives welcome the Sino-Australian FTA. Hence, Catherine Livingstone, president of the Business Council of Australia, argued that ChAFTA offers significant opportunities for two-way trade and „deliver lasting benefits for the whole community“ (see ibid.).